2015 (12) TMI 1515 - AT - Income Tax

Revision u/s 263 - as per CIT(A) AO did not verified the issues with regard to claim of deduction u/s 80IB(10) of the Act at the time of completion the assessment - Held that - Ee are of the opinion that the assessment order passed by the Assessing Officer is not erroneous insofar as it is not prejudicial to the interest of the Revenue. The CIT assumed his jurisdiction to revise the assessment order on the issues, which are considered by the A.O. in the assessment order. Therefore, the order passed by the CIT under sec. 263 of the Act is not maintainable; accordingly, we quashed the CIT s order and restore the assessment order as CIT cannot assume the jurisdiction on the same issue, which is already considered by the Assessing Officer on the guise of revision by stating that the Assessing Officer has conducted inadequate enquiry or there is a lack of enquiry - Decided in favour of assessee

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.
2. Ownership and transfer of land for the housing project.
3. Validity of the assessment order under Section 143(3) and its revision under Section 263 by the CIT.
4. Adequacy of the Assessing Officer's (AO) enquiry during the assessment proceedings.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The primary issue revolved around the eligibility of the assessee, a partnership firm engaged in real estate development, for claiming a deduction under Section 80IB(10) of the Income Tax Act for the housing project "Vasanta Vihar, Madhurawada". The AO initially allowed the deduction after verifying the books of accounts and other details, concluding that the assessee met the conditions stipulated in clauses (a) to (d) of subsection (10) of Section 80IB. However, the CIT later contested this, arguing that the assessee did not fulfill the mandatory requirements, particularly concerning the ownership and development of the land.

2. Ownership and Transfer of Land:
The CIT's show-cause notice highlighted that the land on which the project was developed was owned by individuals (Shri V. Vasanth Babu and eight others), not the partnership firm. The CIT argued that the partnership firm did not play a significant role in the development, suggesting the firm acted merely as a contractor. The assessee countered this by stating that the land was transferred to the firm's books as capital contribution and was shown as closing stock. The assessee also argued that no registered deed was necessary for such a transfer under Section 14 of the Indian Partnership Act. The tribunal found that the land was indeed transferred to the firm by way of capital contribution, making it the property of the firm, thus meeting the conditions for deduction under Section 80IB(10).

3. Validity of the Assessment Order and Revision by CIT:
The CIT revised the assessment order under Section 263, claiming it was erroneous and prejudicial to the interest of the Revenue because the AO did not properly verify the issues regarding the deduction claim. The tribunal, however, held that the AO had conducted a detailed enquiry during the assessment proceedings, and the CIT's revision was based on a different interpretation of the same facts. The tribunal emphasized that the AO's order, which was one of the possible views, could not be deemed erroneous merely because the CIT disagreed with it.

4. Adequacy of the AO's Enquiry:
The CIT argued that the AO did not conduct a proper enquiry into the ownership and development of the land. The tribunal, however, noted that the AO had issued a detailed questionnaire and received comprehensive responses from the assessee, indicating that a thorough enquiry was conducted. The tribunal distinguished between lack of enquiry and inadequate enquiry, stating that the CIT could not assume jurisdiction under Section 263 merely because the enquiry was deemed inadequate. The tribunal concluded that the AO had made a detailed enquiry and allowed the deduction based on the information provided.

Conclusion:
The tribunal quashed the CIT's order under Section 263, restoring the AO's original assessment order. It held that the AO had conducted a proper enquiry and that the assessee met the conditions for deduction under Section 80IB(10). The tribunal emphasized that the CIT could not assume jurisdiction for revision merely based on a different interpretation of the same facts, especially when the AO's order was one of the possible views. The appeal of the assessee was allowed, and the assessment order was deemed not erroneous or prejudicial to the interest of the Revenue.